The Gerova Financial Group is facing allegations that its financial statements overvalued illiquid and severely impaired assets to create an illusion of a large capital base to Gerova investors. On February 23, 2011, the New York Stock Exchange halted trading in Gerova Financial Group shares in response to the allegations.
Our securities fraud lawyers are in the process of investigating these claims on behalf of Gerova investors. If it is found that Gerova engaged in violations of securities laws, Gerova investors may have valuable legal rights. We are offering a free consultation to all Gerova investors who sustained financial damage because of these events. If you are a Gerova investor, we urge you to contact one of our securities fraud lawyers today to protect your legal rights.
Gerova Financial Group Allegations
Gerova is a Bermuda-based reinsurance and financial services group. On January 18, 2011, Gerova announced that it had hired Kroll, an intelligence and risk analysis firm, to investigate the authors of a recent critical report issued by Dalrymple Financial LLC where it characterized Gerova as a “shell game” that “has many hallmarks of a classic fraud.”
“We believe it is a repository for impaired, illiquid hedge fund assets, which are used for regulatory capital,” said the Dalrymple report on Gerova. “We believe Gerova Financial Group is likely fraudulent and the firm’s assets, hence the shares, worth a fraction of the current stated value.” The news caused Gerova stock to fall $2.98 or 11 percent, to close at $24.32.
On February 10, 2011, Gerova announced that four board members and its President had resigned and that Dennis Pelino would be appointed president and CEO. But less than week later, Pelino withdrew his name from consideration. These revelations caused Gerova shares to fall $9.31 or 60% for four straight trading sessions, to close at $6.39 on February 16, 2011.
On February 23, the New York Stock Exchange halted trading in shares of Gerova Financial Group, saying it was evaluating the need for further disclosures and the suitability for the reinsurer’s continued listing. The week prior, Gerova Financial said it had been contacted by the exchange over unusual trading activity in its stock.
That day, shares of the company on the New York Stock Exchange had closed at $5.28. In total, Gerova shares lost 90 percent of their value since June 2010.
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